The use of technology has changed the way people communicate and interact with each other within their social circle. This has created opportunities for financial services companies to meet customer expectations through various alternative channels. Mobile banking is one of the channels which offers various multiple services to the customers in order to bypass the traditional branch-based retail banking. However, sharing personal financial information and payment information through mobile banking proves an obvious risk to the consumer. The amount of financial risk associated with the individuals varies from person to person as per their tolerance level. The aim of the present paper is to assess the effect of different levels of Financial Risk Tolerance (FRT) on adoption of mobile banking in India. The paper identifies the FRT levels of mobile banking users of India and then studies the effect of different levels of FRT (high, moderate, low) of users on adoption of mobile banking services. The findings of the paper are of help to the financial marketers to develop and offer various realistic options to the adopters as per their FRT levels.

Description

Financial Risk Tolerance (FRT) refers to an investor’s attitude towards risk and it can be defined as “the amount of uncertainty or investment return volatility that an investor is willing to accept when making a financial decision” (Grable and Lytton, 1999; Grable, 2000; Hallahan et al., 2003; and Faff, 2008). Because of the economic uncertainties present in the consumer financial marketplace, evaluating FRT as an attitudinal input for making any financial decision is considered to be an important factor of interest to researchers, practitioners, and policy makers. In everyday language, risk tolerance can be explained as willingness by an individual to engage in a behavior that offers a desirable goal along with uncertainty attached in attainment of that goal accompanied by possibility of loss (Kogan and Wallach, 1964; Okun, 1976; and March and Shapira, 1987). It is inverse of risk aversion that describes an individual’s doubtfulness while accepting a choice having uncertain outcome among the available alternative choices having more certain outcome. In respect to financial decision making, FRT is generally defined as the maximum amount of uncertainty someone is willing to accept when making a financial decision (Grable and Joo, 2004).

Sulaiman (2012) termed FRT as the level of risk that a client believes they are willing to accept. He further added that FRT must be measured simply because it is an aspect of utility for any investment decision and maximizing the expected utility is the ultimate goal for any financial activity. Therefore, FRT is assumed to be a crucial part of individual choice about deciding asset allocation, retirement plans, wealth accumulation, insurance policy, and use and management of credit cards (Grable and Lytton, 2001; Hanna et al., 2001; and Bailey and Kinerson, 2005). It may also be an important factor in determining many government policies related to consumer risks regarding financial decisions. All these above examples are the situations where a person’s FRT influences his/her behavior. Along with this, risk tolerance is also considered as one of the important factors in determining consumer’s willingness for adopting any new technology, i.e., mobile banking (Cope et al., 2013).